Insurance groups are divided over legislation to privatize CompSource Oklahoma, the state's workers' compensation insurer of last resort holding nearly one-third of the current market.
The legislation, HB 2201, moved through the House Insurance Committee and is a vote in the House Calendar Committee away from reaching the House floor. The bill would convert CompSource into the new CompSource Mutual Insurance Co., which would be a private, mutualized company owned by policyholders.
Rep. Randy Grau, the bills Republican sponsor, told Bests News Service the state doesn't think it needs to be in the insurance business. He said the bill, which has the support of Gov. Mary Fallin as part of a larger workers compensation reform effort, will still allow CompSource to provide residual market coverage. Grau said the bill is written to make the workers compensation market level for all insurers.
The bill would also require CompSource to pay assessments to the state Property and Casualty Insurance Guarantee Association; pay state taxes; and be regulated by the Oklahoma Insurance Department. The bill meets the demands to privatize the company, as requested by a 2009 legislative task force.
But some insurance industry critics said the bill maintains CompSource's competitive advantages. The American Insurance Association indicated the House bill and it's Senate companion do not represent a true privatization of CompSource. These bills are a mischaracterization of privatization and would perpetuate an unlevel, unfair playing field for insurers in California, said AIA public affairs manager Benjamin Tomchik in a written statement. CompSource wants it both ways: to have the benefits of a private insurer while continuing to benefit from state sponsorship. No private insurer enjoys such benefits and for true privatization to occur, neither should CompSource."
The bill would maintain CompSource's advantaged position in the marketplace, said Trey Gillespie, senior workers compensation director at the Property Casualty Insurers Association of America. The bill exempts CompSource from tying it's rates to loss-cost modifiers set by the National Council on Compensation Insurance, which uses company data in projecting insurer's loss costs. CompSource, he said, would not have to submit any data to NCCI. Also, CompSource would be exempt from rate review by the Oklahoma Insurance Department.
Exemption from loss-cost filing and rate review means private carriers lack sufficient information to set rates for policyholders who want to leave the residual market or CompSource coverage, a PCI comparison sheet said. Also, CompSource would see it's existing federal tax exemption heightened, Gillespie said. He said it would allow CompSource to apply it's federal tax exemption to subsidiaries it creates and in instances where it might compete in other lines and in other states.
Not all sectors of the insurance industry oppose the bill, which has support from the Independent Insurance Agents of Oklahoma, said Dan Ramsey, the group's president and chief executive officer.
Requiring rate review is a bad idea because it would eliminate the continuation of CompSource as an insurer of last resort, thus making it impossible for first responders such as fire departments to buy workers compensation insurance on the private market, Ramsey said. The bill strips CompSource of preferential treatment in writing workers compensation for state employees. It opens it all up to the free market, he said. I think that's a big win for carriers and agents. Also, the bill would improve the market for consumers, said Ramsey, who worked at an agency for 22 years. Currently, CompSource clients cannot take rate complaints to anyone but CompSource, but the bill would allow them to take complaints to the state insurance commissioner. It's much better for the consumer to have somebody overseeing what they're doing, he said.